The Effect of Financial Ratio on Financial Distress in Non-Financial Companies Listed on IDX

Abstract

The purpose of this study is to analyse variables that affect financial distress in non-financial companies listed on Indonesia Stock Exchange (IDX) for the 2018-2022 period. Independent variables used in this research are liquidity ratio, profitability ratio, leverage, and activity ratio. There are also several control variables such as sales growth and firm size, and the pandemic as a dummy variable. The dependent variable used in this research is financial distress which will be measured by the interest coverage ratio. This research uses a quantitative approach with a logistic regression model. The number of samples that meet the characteristics are 324 companies on the Indonesia Stock Exchange during the 2018-2022 period. The research results show that the current ratio, debt to equity, return on assets, and firm size have a significant effect on financial distress. Meanwhile, the variables of total asset turnover, sales growth, and pandemic do not effect on financial distress.